Thursday, March 31, 2016

BP and CNPC sign BP's first shale gas production sharing contract in China

LONDON -- BP and China National Petroleum Corporation (CNPC) today signed a production sharing contract (PSC) for shale gas exploration, development and production in the Neijiang-Dazu block in the Sichuan basin, China. Witnessed by BP Group Chief Executive Bob Dudley and CNPC Chairman Wang Yilin, the contract is BP’s first shale gas PSC in China and covers an area of approximately 1,500 km2. CNPC will be operator for this project.

“We are pleased to reach this significant milestone as part of our strategic partnership with CNPC, building on our successful cooperation in and outside of China,” Dudley said. “We are looking forward to working together with CNPC on technology, operational and subsurface techniques in unconventional resources. We will bring our worldwide experience to our first unconventional gas project in onshore China with CNPC. We will combine this with CNPC’s knowledge and experience to bring gas to China’s growing clean energy market. China continues to be an important part of BP’s portfolio.”

This PSC is the first achievement from BP and CNPC’s framework agreement on strategic cooperation, which was signed last October, during the President of The People’s Republic of China, Xi Jinping's visit to the UK. In addition to unconventional resources, the framework agreement covers possible future fuel retailing ventures in China, exploration of oil and LNG trading opportunities globally, and carbon emissions trading as well as sharing of knowledge around low carbon energy and management practices.

CNPC Chairman Wang commented: “CNPC and BP's existing cooperation covers various areas including retail business in China, overseas upstream exploration and development and international trading. Building upon the framework agreement on strategic cooperation signed last year, this unconventional resource PSC is a manifestation of our deepening cooperation. By leveraging the parties' complementary advantages, CNPC and BP will jointly realize the efficient development of unconventional resources.”

BP’s Energy Outlook (2016 edition) expects that by 2035 shale gas will account for a quarter of the total gas produced globally and China will become the world’s largest contributor to growth in shale gas production.

“As a new strategic industry for China, the exploration, development and production of shale gas will significantly benefit China’s energy mix in a long run,” said Edward Yang, BP China president. “Through this PSC, BP once again clearly reaffirms our commitment to being one of China’s preferred energy partners to support the country in developing cleaner energy for a greener future.”

Pierre Andurand, a hedge fund manager who predicted the oil collapse, said crude is starting a “multi-year bull run” because low prices have curbed supply.

Crude futures, currently trading near $40/bbl, will rebound to $60 to $70 this year and $80 in 2017, the chief investment officer of London-based hedge fund Andurand Capital Management LLP said in a newsletter to investors. A spokesman for the money manager declined to comment. “Large spending cuts are taking a toll on operational maintenance,” according to the newsletter, which was dated February. “After having been in an oversupplied market we expect inventory draws to start in a few months and accelerate quickly.” Oil has slumped about 60% since mid-2014, prompting companies to lay off workers, cut investment and cancel some projects. While prices have rebounded from a 12-year low reached earlier this year amid speculation the surplus is easing as U.S. output declines, stockpiles in the world’s largest oil consumer continue to grow.

OPEC leader Saudi Arabia has already achieved its objective of curbing supply growth from rivals, and its diplomatic efforts with fellow producers may be aimed at averting a price surge in coming years as production falls short of demand, according to the newsletter. Most OPEC members will meet with Russia on April 17 in Doha to complete an accord on capping oil production, an initiative that has helped revive prices. “It is possible that the Saudis are now less worried about short-term downside risk than medium-term large upside risk,” Andurand wrote. The kingdom, which “does not want crude oil prices to spike,” has realized that the slump in later-dated futures prices “has created a significant supply gap in the years to come.”

Eni has signed a farm-out agreement (FOA) with Chariot Oil & Gas that provides the operatorship to Eni and a 40% stake into Rabat Deep Offshore exploration permits I-VI offshore Morocco, located in the Northern Atlantic Margin of Morocco.

The completion of this FOA is subject to the authorization of the Moroccan authorities, to current partners’ approval and other conditions precedent. The agreement provides the operatorship to Eni and a 40% stake of the license, as well as the exploration rights over an area of 10,780 square kilometers, with water depths ranging from 150 meters to 3,500 meters.
At completion of the agreement, the license will include: Eni (operator, 40%), Woodside (25%), Chariot (10%), and the Office National des Hydrocarbures et des Mines (25%). S

Wednesday, March 30, 2016

Oil prices rebounded on Wednesday, despite a modest build in crude oil stockpiles last week, but concern that a two-month rally was fading in an oversupplied market capped gains. #Brentoil climbed 49 cents to $40.34 a barrel as of 12:03 GMT after settling down $1.13 in the previous session. U.S. crude rose 63 cents to $38.91 a barrel. The American Petroleum Institute said late Tuesday that U.S. #crudestocks rose last week by 2.6 million barrels to 534.4 million barrels, only slightly more than the 2 million barrel build analysts had expected. The Energy Information Administration was to publish its storage data on Wednesday at 1430 GMT. Analysts expect the EIA report to show a supply build of 3.16 million barrels after an increase of 9.4 million barrels last week to an all-time high.

TEHRAN, Iran -- Iran will attend talks with fellow OPEC members and Russia in Qatar next month without joining their proposal to freeze crude oil production, according to a person familiar with the nation’s policy.

Oil Minister Bijan Namdar Zanganeh will attend the discussions in Doha on April 17, said the person, who asked not to be identified as the talks are private. Iran will maintain its policy of regaining market share lost during years of sanctions so won’t accept limits on its output, the person said. Most OPEC members, including Saudi Arabia, have said they will go to the meeting.

“By attending the freeze meeting, and yet still being able to say they managed to escape the freeze, Iran earns some brownie points with its domestic audience,” said Olivier Jakob, managing director at consultant Petromatrix GmbH in Zug, Switzerland.

The proposal to cap production will help global markets gradually re-balance as rising demand whittles away a surplus, according to Saudi Arabia’s Oil Minister Ali al-Naimi. Brent crude, the international benchmark, has risen about 40% from 12-year low of $27.10/bbl in January. Zanganeh dismissed any freeze agreement that would apply to Iran as “ridiculous” because the nation aims to revive production after nuclear sanctions were lifted in January.

Iran’s attendance means all 13 members of the Organization of Petroleum Exporting Countries except Libya are scheduled to take part in the freeze talks. While an initial accord in February between Saudi Arabia, Qatar, Russia and Venezuela to cap production at January levels helped revive oil prices, analysts including Commerzbank AG say a freeze would have little impact even if more nations join, because most aren’t on track to increase output anyway. Non-OPEC oil producers Argentina and Brazil don’t plan to join the talks.

The Gulf-based OPEC members’ readiness to abide by any commitment to freeze may soon be tested as Saudi Arabia and Kuwait plan to restart their shared Khafji oil field. Production at Khafji, halted since October 2014 because of environmental concerns, will soon resume in “small quantities,” Kuwaiti state news agency Kuna reported, citing acting Oil Minister Anas al-Saleh.

Restarting Khafji means the countries will need to reduce output somewhere else in order to keep their output steady, said Petromatrix’s Jakob.

NEW YORK -- Oil declined for a fourth day before weekly U.S. government data forecast to show increasing crude stockpiles kept supplies at the highest level in more than eight decades.

Futures lost as much as 1.8% in New York after slipping 0.2% Monday. Inventories probably rose by 3 MMbbl last week, according to a Bloomberg survey before an Energy Information Administration report Wednesday. That would be a seventh weekly gain. Traders boosted net-long positions in U.S. crude last week to the highest since mid-June, exchange data showed.

Oil faces “an overhang of excess production capacity and inventories,” Kevin Norrish, managing director for commodities research at Barclays Plc, said in a report. Markets “also face another obstacle in the recovery process, that of positioning, which is now approaching bullish extremes.”

Oil tumbled to a 12-year low this year before rebounding on speculation the global surplus will ease as U.S. output declines. Saudi Arabia, Russia, Qatar and Venezuela agreed last month they would cap production at January levels if other producers followed suit to tackle a global oversupply.

West Texas Intermediate for May delivery fell as much as 69 cents to $38.70/bbl on the New York Mercantile Exchange and was at $38.80 as of 10:24 a.m. London time. The contract lost 7 cents to close at $39.39 Monday. A fourth day of declines would be the longest run of losses since Feb. 11.

U.S. Stockpiles

Brent for May settlement dropped as much as 80 cents, or 2%, to $39.47/bbl on the London-based ICE Futures Europe exchange. The contract fell 17 cents to $40.27 Monday, the lowest close since March 15. The global benchmark crude was at a premium of 75 cents to WTI on Tuesday.

Money managers boosted net-long positions in WTI by 15% to 235,830 contracts in the week to March 22, the highest since the week to June 16, according to the U.S. Commodity Futures Trading Commission.

U.S. crude inventories increased to 532.5 MMbbl through March 18, according to data from the EIA. Gasoline stockpiles probably dropped by 2.5 MMbbl last week, according to the median estimate in the Bloomberg survey. That would be a sixth weekly decline.
Indonesia will attend a meeting of major oil exporters in Doha next month to consider an output freeze, according to Energy and Mineral Resources Minister Sudirman Said. Prices need to be at a sustainable level that’s attractive for producers without creating pressures, Said told reporters in Jakarta.

Other news:

Crude at $45/bbl to $50/bbl is enough to encourage India’s exploration without squeezing fuel consumers, Oil Minister Dharmendra Pradhan said in an interview Monday. Commodities including oil and copper are at risk of steep declines as recent advances aren’t fully grounded in improved fundamentals, according to a report from Barclays.

Even as US oil production started to slide in the second half of 2015, the downside risks to oil prices continued to dominate.

In the third quarter, broad-based manufacturing softness and financial market turmoil threatened to derail growth in developed markets, bringing some focus back to the demand side of the ledger. Annual oil demand growth proceeded to drop off in the fourth quarter from above 2% to 1.2% with acute cracks in China and advanced economies, seemingly confirming analysts' worst fears.

But Credit Suisse Global Energy Economist Jan Stuart concludes that oil demand "growth appears to be re-accelerating" in 2016, with the recent bout of softness attributable to a warm winter, subdued activity in resource-extracting industries, and persistent weakness in select sputtering emerging markets like Russia and Brazil. "Oil demand growth is alive and well," he writes in a recent note. "We think that with hindsight this winter will look like a dip in an otherwise still unfolding fairly strong growth trend that is partly fueled by the ongoing economic recovery of in North America and Europe and longer standing trends across key emerging market economies." While concerns about global growth linger, demand for crude doesn't match the narrative that a worldwide recession is imminent. In particular, for the world's two largest economies, the US and China, Stuart notes that oil demand growth has rebounded following a sluggish fourth quarter. "While on balance oil demand growth appears relatively sluggish still in the first quarter; February data either improved on January (e.g. Brazil, US); or extended strong growth (e.g. India, South Korea), while in China demand appeared to have rebounded as well," he writes.

Demand for oil has been increasingly attributable to passenger vehicles rather than its use as an input in the production process, as the middle classes in emerging markets swell.

Monday, March 28, 2016

Venezuela, owner of the world’s largest crude oil reserves, suddenly has a deep thirst for American oil. The state-owned oil company, has ordered millions of barrels of crude from the US this year, according to published reports and data provided to Bloomberg, in a sign of how the lifting of the ban on US oil exports last year has scrambled world energy markets.

The South American country has long had frosty relations with the United States. Still, it has ordered 500,000 barrels of US crude from oil trader PetroChina, Reuters reported. That’s on top of 5.4 million barrels of benchmark WTI oil it ordered and at least 1 million barrels shipped this month to PDVSA’s refinery in nearby Curacao.

PDVSA, despite having access to the world’s largest petroleum reserves, according to the BP statistical review, uses lighter crude from abroad to blend with its heavier production. In 2015, the company imported about 40,000 b/d from countries including Russia, Nigeria and Angola, according to Bloomberg. Now, that’s increasingly coming from the US, where the ban on exporting most oil was lifted in December.

At the end of January, PDVSA received its first cargo of 548,000 barrels of WTI in Curaçao, two people familiar with the shipment said at the time. Earlier this month, the company issued a tender for 12 million barrels of crude from April to June, including WTI, Russian and Nigerian oil. Last week, the oil tanker Orpheas was said to be en route to Curacao from the US, according to ship-tracking data compiled by Bloomberg and a person familiar with the matter. The vessel is a Suzemax tanker, with a typical cargo capacity of 1 million barrels.

It’s a reversal from the past. Venezuela exported about 800,000 barrels of crude a day to the US in 2015, according to the Energy Information Administration.

Venezuela was trying to figure out a way to use US crude even before the export ban was lifted, said Francisco Monaldi, a fellow at Rice University. PDVSA’s own production of lighter oil has cratered in in recent months along with the rest of the country’s economy.

NEW YORK -- Oil traded near $39/bbl in New York amid speculation that a meeting of crude-producing countries next month won’t ease a global supply glut.

Futures fell after earlier rising as much as 1.7%. Iran and Libya are the two OPEC members that haven’t pledged to attend production-freeze talks on April 17 in Doha, Qatar. The absence of the countries that aim to restore supplies shuttered by conflict and sanctions means any accord is unlikely to be effective, Commerzbank AG said last week.

"There’s a growing realization that the meeting in Doha is not going to be effective," said Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Florida. "The U.S. has lost about 500,000 bopd from its peak, but the Iranians are planning to increase output by more than 1 million, so we’re going to see the surplus grow."

Oil has climbed back from a 12-year low last month on speculation that the global surplus will ease as U.S. output declines and major producers including Saudi Arabia and Russia discuss capping output. U.S. data last week showed inventories rose by more than three times what was forecast, while imports increased to the highest since June 2013.

West Texas Intermediate oil for May delivery fell 30 cents, or 0.8%, to $39.16/bbl at 10:11 a.m. on the New York Mercantile Exchange. Total volume traded was 48% below the 100-day average.

Brent for May settlement slipped 43 cents, or 1.1%, to $40.01/bbl on the London-based ICE Futures Europe exchange. Prices slipped 1.8% last week. The global benchmark crude traded at an 85-cent premium to WTI.

Trading in New York and London was closed Friday for the Good Friday holiday.

Hedge Funds

The number of bets on rising oil has barely increased as crude jumped more than 50% since Feb. 11. Meanwhile, the liquidation of short positions during the past seven weeks covered by data from the U.S. Commodity Futures Trading Commission was the largest in records going back a decade. That suggests the upward pressure on prices has come from traders cashing out of bearish wagers.

Rigs targeting oil in the U.S. fell by 15 to 372, the lowest since 2009, Baker Hughes Inc. said on its website Thursday. More than 150 have been parked since the start of the year.

"There was speculation that the return of $40 oil would lead to a return of rigs," said Bob Yawger, director of the futures division at Mizuho Securities USA in New York. "The data shows this isn’t the case."

Iran investment; Producer meeting:

Iran, committed to boosting output after sanctions were lifted in January, needs $40 billion for oil projects in the year ending next March, according to Oil Minister Bijan Namdar Zanganeh. Oman, a non-OPEC oil exporting country, will attend the Doha meeting, CNBC Arabia reported.

SHANGHAI -- China’s crude imports will rise further from a record this year to feed its expanding refining sector and strategic reserves, according to Standard Chartered Bank.

The nation’s average crude imports will rise by as much as 600,000 bpd this year, analysts including Priya N. Balchandani said in a March 24 report. Imports last month surged above 8 MMbpd for the first time and exceeded volumes shipped to the U.S., the world’s top oil user, according to the bank. Standard Chartered expects China’s crude imports will top 10 MMbpd by late 2018 or early 2019. “Strong crude import growth accompanies a continuing build in China’s refining industry,” the analysts wrote in the report. “This expansion has combined with a build in strategic #petroleumreserves to keep crude imports high.” China took advantage of falling oil prices to fill strategic reserves, pushing imports 8.8% higher last year. The country is continuing its “relentless” drive to expand refining capacity as demand grows and the country relies on overseas supplies of liquefied #petroleum #gas, naphtha and fuel oil, the bank said.

Robust Refining

Refining volumes will stay “ robust” to satisfy growing #gasoline and jet fuel demand in the world’s largest automobile market, the bank said. The country has boosted exports of diesel as slowing industrial production damps consumption.

Average oil demand in the world’s second-largest crude consumer is expected to grow by 420,000 bpd this year, the bank said, adding that apparent #oil product demand expanded 6.2 percent last year to 9.4 MMbpd. #China will account for 37% of global demand growth this year, Standard Chartered estimates.

China’s fuel pricing system will also support the expansion of crude imports and refining capacity, the bank said. China’s government decided late last year to stop lowering fuel prices when crude trades below $40/bbl, supporting gasoline and diesel above levels where they would be trading internationally.

Sunday, March 27, 2016

HONG KONG -- Oil extended its decline after the biggest loss in six weeks, as rising U.S. crude stockpiles kept supplies at the highest level in more than eight decades.

Futures dropped as much as 1.6% in New York after slumping 4% Wednesday, the most since Feb. 11. Inventories rose by more than three times what was projected in a Bloomberg survey, while imports last week increased to the highest since June 2013, Energy Information Administration data showed. Iraq will attend a meeting between major exporters in Doha next month, according to an oil ministry spokesman. “It’s a globally oversupplied market,” Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone. “U.S. imports were very strong, and as a consequence, there was a very big build in crude inventories. On the positive side, we do seem to have a gradual, trending decline in production.” Oil tumbled to a 12-year low this year before rebounding on speculation the global surplus will ease as U.S. production declined. Crude stockpiles at Cushing, Okla., the delivery point for West Texas Intermediate and the nation’s biggest oil-storage hub, dropped for the first time in eight weeks, falling from a record, EIA data showed Wednesday.

WTI for May delivery slid as much as 62 cents to $39.17/bbl on the New York Mercantile Exchange and was at $39.27 at 8:04 a.m. London time. The contract fell $1.66 to $39.79 Wednesday. Total volume traded was about 25% below the 100-day average. Front-month prices are down 0.4% this week, heading for the first weekly drop in six weeks.

U.S. Inventories

Brent for May settlement lost as much as 42 cents, or 1%, to $40.05/bbl on the London-based ICE Futures Europe exchange. The contract declined $1.32 to $40.47 on Wednesday. Prices are down 2.5% this week. The global benchmark crude was at an 91-cent premium to WTI.

U.S. crude stockpiles increased by 9.36 MMbbl to 532.5 MMbbl, the highest level since 1930, according to data from the EIA. Imports rose for the first time in three weeks to 8.38 MMbopd. Production fell to 9.04 MMbopd, the lowest level since November 2014.

Saturday, March 26, 2016

The fall in US light, tight oil production has accelerated in recent months, as oil prices have reached new lows and pressures have mounted for producers. Output of these shale and similar unconventional oils is expected to continue declining rapidly this year if WTI crude prices remain below $40 per barrel. These trends are feeding the perception that a "natural rebalancing" of the oil market, led by the reduction in US supply, is gradually occurring - albeit more slowly than many initially expected. Yet the drop in US output does not necessarily vindicate the dominant oil market narrative that Opec is driving high-cost production out of the market. As productivity gains continue, the economics of US shale are now competitive with many other production sources, with output now likely to stabilize at around $50. Given both its evolving cost structure and short project cycle, the US shale is not the solution to the current oil market imbalance. Unless Opec decides to intervene, a sustained rebalancing will probably not materialize until deferrals and cancellations of other projects also start to bite.

US light, tight oil (LTO) production has decreased consistently over the past year, and the rate of decline has accelerated since November, as financial pressures have grown for producers and oil prices have reached new lows this cycle. Output from US shale plays dropped by 211,000 barrels per day in the past 4 months alone -- nearly half of the overall fall since its March 2015 peak of 5.49 million b/d.

With WTI prices below $40, major shale players, including ConocoPhillips, Continental Resources, EOG Resources, Hess, Occidental and Whiting Petroleum are significantly cutting capital expenditure again this year, further reducing rig counts. Many smaller debt-laden E&P firms are coming under intense financial strain and have barely enough cash to cover interest payments. Next month's bank redeterminations will hit struggling E&Ps harder than last October's resets, with borrowing capacities likely to be cut by around 25% on average -- and much more for some reserve-based lending agreements.

Friday, March 25, 2016

Oil prices steadied on Thursday, paring losses after a renewed drop in US oil rigs, but analysts and traders said there could be another selloff in the coming week if U.S. crude stockpiles hit record highs again.

Earlier in the day, US crude futures slid 4 percent and Brent below $40 a barrel, extending bearish sentiment from Wednesday when the US government reported a crude inventory build three times above market expectations.
But data later on Thursday from oil services firm Baker Hughes, showing U.S. oil drillers cutting 15 rigs this week after a pause last week, boosted sentiment. The US oil rig count now stands at 372, the lowest since November 2009.
US crude settled down 33 cents at $39.46 a barrel, recovering from a session low of $38.33. For the week, it rose 2 cents, finishing up for a 6th straight week.

Brent settled down 3 cents on the day at $40.44 a barrel, after an earlier drop to $39.22. For the week, it fell 76 cents, or nearly 2 percent, its first decline in 6 weeks.

Despite the stumble, oil prices remain about 50% higher from multi-year lows hit in January from glut worries. While declining US oil output and strong gasoline demand were responsible for some of that recovery, the bulk of it was powered by major producers' plans to freeze output at January's highs.

While this week's drop of oil 15 rigs was not a game changer to the market, it offered a reprieve to worries that there was a daily glut of some two million barrels in crude. "After last week's increase of one rig, some may have assumed that the continuing decrease in rig counts was finally abating," said Pete Donovan, broker at Liquidity Futures in New York. "Apparently not so." Others braced for further price weakness from more U.S. inventory builds. "We see limited bullish assistance to the complex from a fundamental vantage point," said Jim Ritterbusch of Chicago-based oil consultancy Ritterbusch & Associates.

Tuesday, March 22, 2016

NEW YORK (Bloomberg) -- The 800,000 bpd of crude production unaccounted for in the International Energy Agency’s estimates of oil supply and demand for last year are a “poor explanation” for the recent rally in prices, according to Morgan Stanley.

The “missing barrels”—which result from the difference between the IEA’s estimate of oil supply and demand—are probably present in stockpiles outside the 34 members of the Organization for Economic Cooperation and Development, Morgan Stanley said in a note Monday. The proportion of global inventories in developing countries, such as China, which aren’t directly monitored by the agency, should be growing, the bank said.

“Missing barrels are one of many oil-market myths cited by bulls,” Morgan Stanley analysts including Adam Longson said in the note. “The theory is that oil demand is understated because OECD inventories do not capture the full imbalance. However, just because you can’t see them, doesn’t mean they are not there.”

Brent crude, the international oil benchmark, has risen about 50% since hitting a 12-year low of $27.10 on Jan. 20. For Morgan Stanley, the rally is the result of macroeconomic trends—notably the weakening dollar—and other events such as the potential for a production freeze when OPEC and non-OPEC producers meet on April 17.

In its monthly oil-market report, the Paris-based IEA includes a “miscellaneous to balance” section that lists the barrels its analysts haven’t been able to locate after taking account of supply, demand and the amount of oil placed into storage. That number was 800,000 bopd for 2015, “well within the normal range considering the vagaries of oil data,” the agency said in its March 11 report.

Chinese Tanks

“Part of these missing barrels ended in Chinese SPR tanks,” said Giovanni Staunovo, an analyst at UBS Group AG, referring to the nation’s strategic petroleum reserves. Tracking only OECD storage data was useful in the past when developed economies’ oil demand was larger than emerging markets, but that trend has since reversed, he said.

About 77 MMbbl of SPR is in the process of being filled in China, with another 93 MMbbl of capacity expected to be completed by 2020, according to BMI research.

The IEA can’t escape errors in data collection, Morgan Stanley said. “History shows supply and demand tend to be revised as data improves, with no clear pattern. Both have generally been revised up in recent years,” the bank said.

HOUSTON (Bloomberg) -- For oil companies, the legacy of $100 crude is starting to run dry.

A wave of projects approved at the start of the decade, when oil traded near $100/bbl, has bolstered output for many producers, keeping cash flowing even as prices plummeted. Now, that the production boon is fading. In 2016, for the first time in years, drillers will add less oil from new fields than they lose to natural decline in old ones.

About 3 MMbopd will come from new projects this year, compared with 3.3 MMbopd lost from established fields, according to Oslo-based Rystad Energy AS. By 2017, the decline will outstrip new output by 1.2 MMbpd as investment cuts made during the oil rout start to take effect. That trend is expected to worsen.

“There will be some effect in 2018 and a very strong effect in 2020,” said Per Magnus Nysveen, Rystad’s head of analysis, adding that the market will re-balance this year. “Global demand and supply will balance very quickly because we’re seeing extended decline from producing fields.”

A lot of the new production is from deepwater fields that oil majors chose not to abandon after making initial investments, Nysveen said in a phone interview.

Royal Dutch Shell Plc is scheduled to start the Stones project in the Gulf of Mexico’s deepest oil field this year after approving it in May 2013. Benchmark Brent crude averaged $103/bbl that month compared with about $41 on Monday. Stones will add about 50,000 bopd to Gulf of Mexico output at a peak rate, according to Shell.

Two other deepwater projects, run by Noble Energy Inc. and Freeport-McMoran Inc., are due to commence this year, the U.S. Energy Information Administration said in a Feb. 18 report. Anadarko Petroleum Corp. started Heidelberg field in January.

That will help boost production in the Gulf of Mexico by 8.4% this year to a record annual average of 1.67 MMbopd, according to the U.S. Energy Information Administration.

Eni SpA, Italy’s largest oil company, started Goliat field in the Arctic this month and Shell began producing from a new area of the BC-10 project in Brazil on March 14. British driller Tullow Oil Plc plans to begin output from Tweneboa-Enyenra-Ntomme field offshore Ghana in July or August.

“There is a wide range of upstream projects coming online in 2016, and that is a function of the high levels of investment deployed back when we were in a $100/bbl world,” said Angus Rodger, a Singapore-based analyst at energy consulting firm Wood Mackenzie Ltd. “In the short term, they will generate far lower returns than originally envisaged.”

Yet, these developments won’t be enough to counter the natural decline in oil fields that are starting to suffer from lower investment. A little more than a year after Shell approved the Stones project in 2013, oil prices began their slump, with Brent dropping to a 12-year low below $28/bbl in January.

That has squeezed budgets of oil producers and project approvals have dwindled. From 2007 to 2013, companies took final investment decisions on an average 40 mid- to large-sized oil and gas projects a year, Wood Mackenzie’s Rodger said. That fell to below 15 in 2014 and to less than 10 last year. Neither Rodger nor Rystad’s Nysveen expect an upturn this year.

Project Approvals

Morgan Stanley estimates nine projects are in contention to get the green light this year, including BP’s Mad Dog Phase 2 in the Gulf of Mexico and Eni SpA’s Zohr gas field in Egypt. These are among 232 projects, excluding U.S. shale, awaiting approval following deferrals over the past two years, according to a Jan. 29 report.

Companies cut capital expenditure on oil and gas fields by 24% last year and will reduce that by another 17% in 2016, according to the International Energy Agency. That’s the first time since 1986 that spending will fall in two consecutive years, the agency said Feb. 22.

“We see oil investments are declining substantially,” IEA Executive Director Fatih Birol said in Berlin on March 17. “That we’ve never seen in the history of oil.”

Even after reducing costs for conventional projects by an average of about 15% last year, many still aren’t competitive, Wood Mackenzie’s Rodger said. Shell approved the Appomattox oil field in the Gulf of Mexico last year at a break-even oil price of $55/bbl, still above current market rates of $41.49/bbl at 6:19 a.m. in New York Tuesday.

“The industry has had a real reset, with costs coming down and break-even prices for projects falling,” said Brendan Warn, a managing director at BMO Capital Markets in London, said by phone. “But costs will have to come down further.”

From @Bloomberg -- One of the warning lights that there’s too much oil around is no longer flashing, adding to signs that global crude markets are finally on the mend.

Just a month ago, oil traders were weighing up whether to park unwanted crude aboard tankers while BP CEO Bob Dudley joked that swimming pools might be needed to hold the excess. Yet instead of offering bumper profits, as in previous market gluts, stockpiling barrels on ships would result in a financial loss, just as it has done for the past six months, in a sign the current surplus may not be as big as feared.

Declining US oil production coupled with disruptions in OPEC members Iraq and Nigeria have helped revive crude to $40, leading the IEA to conclude that the worst of the rout is over. Contrary to expectations that tankers would be needed, onshore storage hasn’t been exhausted.

A crude trader would lose about $7.6 million if they wanted to park 2 MMbbl at sea for 6 months, more than double the loss they would have swallowed in February, according to data compiled by Bloomberg.

The losses from storage partly reflect that hiring a tanker has become more expensive amid robust demand for crude. Day rates on the industry’s benchmark route—to Japan from Saudi Arabia—advanced to $66,641. That’s about 30% more than a month earlier. In dollars-per-barrel terms, the cost of using the ships to store for 6 months advanced to $6.80 from $6.16 over the month.

Yet the economics also give an insight into the oil market itself. Storing crude at sea becomes profitable when the spread between the current price and longer-term ones, known as contango, is wide enough to cover the cost of hiring a tanker.

The gap between first and seven-month futures narrowed to $2.66/bbl on Monday, from $5.07/bbl on Jan. 29, not enough to cover the cost.

It’s a distinct shift from the market conditions prevalent a month ago. The biggest change is oil supply that’s been unexpectedly curbed. A pipeline linking the northern Iraq to the Mediterranean Sea halted in mid-February, while another from Nigeria was hit by sabotage.

BEIJING -- Patrick Pouyanné, chairman and CEO of Total, and Wang Yilin, chairman of China National Petroleum Company (CNPC), have signed a strategic cooperation agreement to extend existing collaboration between their respective companies.

In the past ten years, Total and CNPC have formed a number of partnerships involving major projects, such as Sulige gas field in Inner Mongolia, China, Halfaya in Iraq, Yamal LNG in Russia, Kashagan in Kazakhstan and Libra in Brazil. “This strategic cooperation agreement reflects our respective commitment to strengthening our partnership and jointly developing new projects,” Pouyanné said at the signing ceremony in Beijing. “In particular, Total will share with CNPC its expertise in the areas of safety and environment, human resources and social responsibility. The agreement further strengthens the existing partnership to support the international strategy of CNPC’s affiliate PetroChina.”

Monday, March 21, 2016

Brazil's state-controlled oil company Petróleo Brasileiro SA posted a record loss in the fourth quarter after booking a large writedown for oil fields and other assets as oil prices slumped.

Petrobras, as the company at the epicenter of Brazil's massive corruption scandal is commonly known, had a consolidated net loss of 36.9 billion reais ($10.2 billion) in the quarter, according to a securities filing.

The bigger-than-expected shortfall was 48 percent larger than the 26.6 billion-real loss a year earlier, the previous record.

The largest fourth-quarter loss expected in a Reuters survey of analysts was for a 9.7 billion reais.

Fourth-quarter writedowns were 46.4 billion reais, the filing said. A year earlier, writedowns were also the cause of Petrobras losses, although they were largely related to the giant price-fixing and bribery scandal that has roiled the company.

In 2016, oil and gas companies could default on an additional $40 billion in debt, according to Fuel Fix, citing a report by Fitch Ratings.

Approximately $6 billion of energy debt has already fallen into default this year, and Fitch Ratings expects energy companies to fall out of compliance on the terms of $9 billion worth of debt agreements over the next month. After that, an additional $40 billion could come in 2016. Fuel Fix noted that, throughout 2015, $17.5 billion in energy debt was in default.

The past three energy defaults have involved missed interest payments, Fitch said, adding that four more companies are expected to miss payments before the end of April. Those companies are Chaparral Energy, LINN Energy, Energy XXI, and Goodrich Petroleum.

LINN Energy has recently said that the company would miss interest payments on two loans, and that filing for Chapter 11 bankruptcy may be “unavoidable.” LINN has a large cash balance after drawing down its available credit, and the company has $1.8 billion in hedges that will ensure cash flow through 2016.

But the company is facing immediate demands on its cash and decreasing revenue. In addition to overdue interest payments, Linn is also expected to have its borrowing base cut by lenders in the coming months. Analysts from Fitch, Raymond James, and Standard and Poor’s all expect LINN to file for Chapter 11 in the coming months.

Friday, March 18, 2016

From @Bloomberg -- Oil surged above $40/bbl in New York for the first time since December as central banks from the U.S. to Norway signaled they will continue to provide economic stimulus to support demand.

The Bloomberg Dollar Spot Index fell a second day after the Federal Reserve scaled back expectations for the pace of interest-rate gains. A weaker dollar bolsters investor demand for commodities priced in the currency. U.S. crude output slid to the lowest level since November 2014 and supplies expanded by 1.32 MMbbl, the smallest gain in five weeks, according to an Energy Information Administration report on Wednesday. "It’s primarily a dollar story right now," said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $3.4 billion. "The weak dollar is bullish for all commodities, especially oil." WTI has surged 54% from a 12-year low touched last month on speculation a global surplus will ease. American shale output is falling and some of the world’s biggest producers including Saudi Arabia and Russia are pledging not to raise their production.

WTI for April delivery rose $1.74, or 4.5%, to settle at $40.20/bbl on the New York Mercantile Exchange. It’s the highest settlement since Dec. 3. Total volume traded was 19% above the 100-day average at 2:44 p.m.

Brent for May settlement climbed $1.21, or 3%, to $41.54/bbl on the ICE Futures Europe exchange. Futures ended the session at the highest level since Dec. 4. The global benchmark crude closed at a 12-cent discount to May WTI. "Reaching $40 gets a lot of attention because it’s a nice round number," said Rob Haworth, an investment strategist in Seattle at US Bank Wealth Management, which oversees $128 billion of assets. "The $30 and $50 levels are more important in terms of investment decisions." The Fed’s Wednesday decision to set a higher bar for when it may raise rates again also bolstered U.S. equities, which erased their losses for the year. The S&P500 Oil & Gas Exploration and Production Index climbed as much as 2.8%.

MEXICO CITY (Bloomberg) -- Mexico will hold a private bidding round for the nation’s shale oil fields this year in part to cater to continued interest from U.S. drillers eyeing expansion south of the border, according to Deputy Energy Minister Lourdes Melgar.

The country’s shale auction “will be this year,” Melgar said in an interview at the Foreign Affairs Mexico Energy Future Conference in New York. Mexico temporarily suspended plans for the country’s first-ever auction of its so-called unconventional oil and natural gas fields last year amid falling international crude prices.

“Companies working on the U.S. side of the border have expressed interest in working on other side of the border,” Melgar said. The interested parties are the "usual suspects" that are producing oil and natural gas in U.S. shale fields and are “mostly independent companies that have been very successful in shale development,” she said.

The decision to proceed with the sale of shale oil and gas fields adds an extra layer to Mexico’s auction plans this year, which also include a bidding round for 10 deepwater areas in the Gulf of Mexico scheduled for Dec. 5. The sales of onshore shale and deepwater fields will be the fourth and fifth oil auctions held by Mexico since the 2014 opening of the country to foreign energy investment, breaking Petroleos Mexicanos’ previous government-held crude production monopoly of more than seven decades.

Best practices

Mexico is still working to develop regulation that assures best practices and sustainability during hydraulic fracturing, where sand, water and chemicals may be pumped deep into wells to fracture shale. The regulation, which will be approved in the upcoming months, will also determine which areas have local support and the appropriate infrastructure and economics to accommodate possible shale development, Melgar said.

“Mexico is looking at ways to develop shale in a sustainable manner and take advantage of it as it has been done in the U.S.,” Melgar said. “With the fall in oil prices some of these areas aren’t as competitive right now, so we are taking advantage of the time we have right now to develop the regulation.”

Bludgeoned by falling energy prices, at least a dozen oil and natural gas companies have opted to cut dividends this year to preserve cash, cannibalizing payouts considered sacrosanct by many investors.

The cost to shareholders: more than $7.4 billion in lost income, compared to what they would have received this year if the payouts remained the same.

It’s another painful measure--along with tens of thousands of layoffs and more than $100 billion in canceled investments--of the toll taken on the industry by the worst oil and gas price slump in decades. The quarterly payments, prized by conservative shareholders as a source of steady income, are unlikely to be restored any time soon.

“It really reinforces the necessity of having a margin of safety if you are buying a stock primarily for its dividend," said Josh Peters, editor of Morningstar Inc.’s DividendInvestor newsletter. “What we have found for some of the energy companies is that the margin of safety was either slim or nonexistent."

Kinder Morgan Inc.’s 75% dividend cut was the biggest, amounting to a $3.44 billion loss for shareholders over the course of 2016. The announcement from North America’s largest pipeline operator “came as a shock to some people and obviously was deplored by some people," founder and Executive Chairman Richard Kinder told analysts at a Jan. 27 meeting.

The move was necessary to help the Houston-based company keep its investment-grade credit rating while ensuring it has enough money to pay debts and grow, Kinder said. Since the Dec. 8 announcement, shares have risen about 20%, compared with a 3% gain for the Alerian MLP stock index, which tracks energy infrastructure companies.

“This is a direct result of investors’ appreciation of the significant efforts we’ve made to live within cash flow and strengthen our balance sheet," spokesman Dave Conover said in an email.

Dividend-slashers including ConocoPhillips ($2.42 billion in annualized cuts) and Anadarko Petroleum Corp. ($447 million) made similar arguments. They followed the lead of Marathon Oil Corp., Eni SpA, Chesapeake Energy Corp. and Transocean Ltd., who cut payouts in 2015 as the industry girded for what’s expected to be a multiyear slump.

Along with a dividend cut, ConocoPhillips also canceled plans to boost production and said it expects to write down the value of some fields by $800 million. “We believe it’s prudent to plan for lower prices for a longer period," CEO Ryan Lance said in a Feb. 4 statement.

European Payouts

In Europe, the downturn forced Repsol SA, Spain’s biggest oil company, to reduce payouts for the first time in seven years after reporting a net loss in the fourth quarter. Norway’s Statoil ASA kept its payout but proposed a scrip dividend last month, allowing shareholders to take their payment in shares instead of cash.

In Canada, Husky Energy Inc., Crescent Point Energy Corp. and Cenovus Energy Inc. also cut dividends. Husky switched from cash to a stock payment last year before completely eliminating the benefit for 2016.

“The Board will continue to review the dividend on a quarterly basis with the objective of restoring a sustainable dividend,” Kim Guttormson, a spokeswoman for Husky, said in an email.

Bloomberg News calculated the cost to shareholders based on the number of periods companies will pay at the lower dividend rate in 2016, assuming no further changes. Repsol has only declared one payment so far this year.

Tough Decision

For smaller or newer drillers like a Cimarex or Range Resources, which each halved their dividend, the decision was probably easier, said Brian Youngberg, an Edward Jones & Co. analyst in St. Louis. With better growth pro

Thursday, March 17, 2016

DOHA, Qatar (Bloomberg) -- Saudi Arabia will join a meeting of producers from within and outside OPEC in Doha next month, adding weight to the campaign by financially stricken crude exporters to freeze output and overcome the glut that’s weighing on the market.

Qatar’s oil minister said that countries would meet in the nation’s capital, Doha, on April 17, without providing details of who would attend. While the participation of Iran is seen as critical for the deal to be effective, the meeting may go ahead without the Persian Gulf nation, according to two delegates who asked not to be identified because the talks are private. Saudi Arabia will attend, according to a person with direct knowledge of the kingdom’s oil policy.

Prices have rallied more than 30% since a mid-February proposal by Saudi Arabia, Russia, Venezuela and Qatar to cap oil output and reduce a worldwide surplus that had seen prices slump to a 12-year low in January. The summit in April would seek commitments from a wider range of producers both within and outside the Organization of Petroleum Exporting Countries.

Kuwait was the first other OPEC member to confirm it would attend, according to an emailed statement from its oil minister. Russian Energy Minister Alexander Novak, speaking to reporters in Moscow, said that 15 countries have confirmed they’ll participate and that Iran is willing to join in. Novak and Saudi Oil Minister Ali al-Naimi planned to discuss the meeting on Wednesday by phone, one person said. Delegates from four OPEC members said they hadn’t yet received an invitation.

Latest Date

April 17 is the latest and firmest date in a series of suggested times for follow-up talks on the freeze. Nigerian Petroleum Minister Emmanuel Kachikwu said on March 3 that those talks would be held in Russia on March 20. The next day, Russian Energy Minister Novak told state television channel Rossiya 24 that a meeting could take place between March 20 and April 1 in Russia, Doha or Vienna.

The proposed freeze “put a floor under oil prices,” Qatari Oil Minister Mohammad Al-Sada said in an emailed statement on Wednesday. “To date, around 15 OPEC and non-OPEC producers, accounting for about 73% of global oil output, are supporting this initiative.”

Oil rallied after the Qatari statement, gaining 4.1% Wednesday to settle at $40.33/bbl in London.

Iran Increase

There are reasons to be doubtful that the planned freeze can radically alter an oil market that’s fallen victim to a global fight for market share, causing stockpiles to rise to a record. Most significantly, Iran is seeking to increase production after the end of economic sanctions and has said it won’t participate in any accord until its output has recovered.

Iran boosted output by 187,800 bopd to 3.13 MMbopd in February, the biggest monthly gain since 1997, OPEC said in a report on Monday.

Brazil will also add more than 100,000 barrels of supply this year and has shown little interest in taking part.

“We will now see if OPEC and Russia are able to freeze the bears in the oil market,” said Olivier Jakob, managing director at consultants Petromatrix GmbH. “The significance of the agreement is that it could remove the perception that OPEC is fighting for market share.”

Other forces have driven prices higher in recent weeks. Outages from Iraq and Nigeria have disrupted more than 800,000 bopd of supply and tightened the Brent market, according to Citigroup Inc. And falling drilling activity in the U.S. shale industry has seen analysts raise forecasts for declines in North American production.

One key question is how fast shale production could come back if OPEC and some non-OPEC producers succeed in driving prices higher.

Oil ministers for Argentina, Venezuela and Colombia didn’t immediately respond to questions on whether they would attend. Ecuador’s oil minister said he still plans to gather Latin American producers before the April 17, after a planned meeting earlier this month was postponed.

“It’s not surprising they’d be willing to agree to this because the outlook for a further production increase was quite limited,” Jeff Currie, global head of commodities research at Goldman Sachs Group Inc., said in an interview on Bloomberg Television. “You can’t operate a cartel the way you used to.”

Prices have rallied more than 30% since a mid-February proposal by Saudi Arabia, Russia, Venezuela and Qatar to cap oil output and reduce a worldwide surplus that had seen prices slump to a 12-year low in January. The summit in April would seek commitments from a wider range of producers both within and outside the Organization of Petroleum Exporting Countries.

Kuwait was the first other OPEC member to confirm it would attend, according to an emailed statement from its oil minister. Russian Energy Minister Alexander Novak, speaking to reporters in Moscow, said that 15 countries have confirmed they’ll participate and that Iran is willing to join in. Novak and Saudi Oil Minister Ali al-Naimi planned to discuss the meeting on Wednesday by phone, one person said. Delegates from four OPEC members said they hadn’t yet received an invitation.

LATEST DATE
April 17 is the latest and firmest date in a series of suggested times for follow-up talks on the freeze. Nigerian Petroleum Minister Emmanuel Kachikwu said on March 3 that those talks would be held in Russia on March 20. The next day, Russian Energy Minister Novak told state television channel Rossiya 24 that a meeting could take place between March 20 and April 1 in Russia, Doha or Vienna.

The proposed freeze “put a floor under oil prices,” Qatari Oil Minister Mohammad Al-Sada said in an emailed statement on Wednesday. “To date, around 15 OPEC and non-OPEC producers, accounting for about 73% of global oil output, are supporting this initiative.”

Oil rallied after the Qatari statement, gaining 4.1% Wednesday to settle at $40.33/bbl in London.

IRAN INCREASE
There are reasons to be doubtful that the planned freeze can radically alter an oil market that’s fallen victim to a global fight for market share, causing stockpiles to rise to a record. Most significantly, Iran is seeking to increase production after the end of economic sanctions and has said it won’t participate in any accord until its output has recovered.

Iran boosted output by 187,800 bopd to 3.13 MMbopd in February, the biggest monthly gain since 1997, OPEC said in a report on Monday.

Brazil will also add more than 100,000 barrels of supply this year and has shown little interest in taking part.

“We will now see if OPEC and Russia are able to freeze the bears in the oil market,” said Olivier Jakob, managing director at consultants Petromatrix GmbH. “The significance of the agreement is that it could remove the perception that OPEC is fighting for market share.”

Other forces have driven prices higher in recent weeks. Outages from Iraq and Nigeria have disrupted more than 800,000 bopd of supply and tightened the Brent market, according to Citigroup Inc. And falling drilling activity in the U.S. shale industry has seen analysts raise forecasts for declines in North American production.

One key question is how fast shale production could come back if OPEC and some non-OPEC producers succeed in driving prices higher.

Oil ministers for Argentina, Venezuela and Colombia didn’t immediately respond to questions on whether they would attend. Ecuador’s oil minister said he still plans to gather Latin American producers before the April 17, after a planned meeting earlier this month was postponed.

“It’s not surprising they’d be willing to agree to this because the outlook for a further production increase was quite limited,” Jeff Currie, global head of commodities research at Goldman Sachs Group Inc., said in an interview on Bloomberg Television. “You can’t operate a cartel the way you used to.”

From @Bloomberg -- Oil maintained gains after a government report showed a smaller-than-anticipated U.S. crude inventory increase.

Crude inventories rose 1.32 MMbbl to 523.2 MMbbl last week, according to the Energy Information Administration. That kept supplies at the highest level since 1930. A 3.2 MMbbl supply gain was projected by analysts surveyed by Bloomberg. Supplies of gasoline and distillate fuel, a category that includes diesel and heating oil, slipped.

West Texas Intermediate for April delivery advanced 96 cents, or 2.6%, to $37.30/bbl at 10:34 a.m. on the New York Mercantile Exchange. The contract fell to $36.34 on Tuesday, the lowest settlement since March 4.

Brent for May settlement climbed $1.03, or 2.7%, to $39.77/bbl on the London-based ICE Futures Europe exchange.

Prices climbed earlier as some OPEC members planned to meet with other producers in April to resume talks on capping production. Members of the Organization of Petroleum Exporting Countries and some other producers plan to meet on April 17 in Doha to discuss a proposal to freeze output, according to Qatar’s energy minister.

CALGARY -- The National Energy Board (NEB), the British Columbia Oil and Gas Commission, the Yukon Geological Survey, the Northwest Territories Geological Survey and the British Columbia Ministry of Natural Gas Development today released the first detailed study estimating the marketable unconventional natural gas resources in the Liard basin.

As changes in technology continue to enable industry to unlock new unconventional gas resources, a collaborative resource assessment reveals that the Liard basin spanning the boundaries of British Columbia, Yukon and Northwest Territories is one of the largest shale gas resources in the world and Canada's second largest known gas resource. There are already existing gas pipelines in the basin in all three jurisdictions because of conventional wells that have been producing for decades.

A resource assessment is an estimate of the amount of oil and/or natural gas found in a given reservoir, and how much can be produced using existing technology. Resource assessments are based on a number of parameters such as the geology of the reservoir and production from existing wells.

Quick Facts:

The Liard basin is expected to contain 219 Tcf of marketable, unconventional natural gas, making it Canada's second largest gas resource behind the Montney formation (449 Tcf) to the southeast in B.C. and Alberta.
Canada's total natural gas usage in 2014 was 3.2 Tcf, making the Liard basin unconventional gas resource equivalent to more than 68 years at Canada's 2014 consumption rate.
Canada has more than 850 Tcf of remaining, marketable gas in areas already served by major pipeline systems. This is the equivalent of 267 years of supply, based on Canada's 2014 consumption rate.

Wednesday, March 16, 2016

From @Bloomberg -- The top of the oil market may be closer than you think.

With Brent futures having bounced back to $40/bbl, the International Energy Agency sees “light at the end of the tunnel,” and Goldman Sachs is spotting “green shoots.” Even so, many analysts warn that, like the failed rally last year, this recovery will sputter once prices go high enough to keep US crude flowing. “If prices keep going up, US production from shale producers is extremely responsive,” Jamie Webster, of IHS Energy, said. “Falling U.S. production is the key dynamic you need to get supply to equal demand, and that might not actually happen,” meaning prices could fall again.

Brent futures have recovered about 40% from the 12-year low of $27.1 reached in January. With output outside OPEC set for its biggest slump since 1992, “prices might have bottomed out,” according to the IEA. Yet world crude benchmarks may struggle to push past $50/bbl this year as any further price recovery only delays the production cuts needed to balance the market, according to the median of a Bloomberg survey of 9 analysts.

While US crude production has retreated 5.5% since last summer, the process of depleting bloated inventories is just getting started, according to Goldman Sachs. The bank, which foresaw oil’s plunge into the $20s, predicts prices still need to stay low enough to starve producers of capital, otherwise the output losses necessary to remove the supply surplus won’t happen. “An early rally in prices before a deficit materializes would prove self-defeating,” Jeffrey Currie, head of commodities research at Goldman Sachs said.

The recovery “could throw a lifeline to US producers” that would “limit oil production declines,” said Giovanni Staunovo, an analyst at UBS.

The argument that $50 represents a ceiling for crude is flawed, according to Sanford Bernstein & Co which sees prices returning to $70 in the next year. The industry can’t stay profitable at current price levels, having lost $3 for each barrel produced last year even as companies squeezed costs, it said.

DOHA, Qatar (Bloomberg) -- #Oilproducers from OPEC and beyond are finalizing a plan to discuss freezing output at a meeting in Qatar in mid-April, the latest move in a campaign by financially-stricken countries to shift the dynamics of an over-supplied crude market.

Qatar’s oil minister said that producers would meet in his capital on April 17. Delegates from three members of the Organization of Petroleum Exporting Countries said they hadn’t yet received an invitation and two people with knowledge of the matter said no date had been finalized. They asked not to be identified because the talks are private.

Saudi Oil Minister Ali al-Naimi and his Russia counterpart Alexander Novak, who represent the world’s largest #oilexporters, will discuss the meeting on Wednesday by phone, one person said.

#SaudiArabia, #Russia, #Venezuela and #Qatar in February proposed an accord to cap oil output and reduce a worldwide surplus. Crude prices extended gains after their initial meeting on Feb. 16 and have climbed about 40% since slumping to a 12-year low in January. Prices may have passed their lowest point as shrinking supplies outside OPEC and disruptions inside the group erode global oversupply, the International Energy Agency said on March.

The proposed freeze “put a floor under the oil under the oil prices,” Qatari Oil Minister Mohammad Al-Sada said in an emailed statement today. “To date, around 15 #OPEC and non-OPEC producers, accounting for about 73% of global oil output, are supporting this initiative.” Oil rallied after the Qatari statement, rising as much 1.5% to $39.33/bbl in London.

Western Gas Partners LP (NYSE: WES) has closed its acquisition of Springfield Pipeline LLC from Anadarko Petroleum Corp.
The $750 million purchase price and certain purchase price adjustments were funded through net proceeds from the issuance of $449 million in aggregate amount of 8.5% perpetual convertible preferred units to First Reserve Advisors LLC and Kayne Anderson Capital Advisors LP; the issuance of 1,253,761 and 835,841 WES common units to Anadarko and Western Gas Equity Partners LP (NYSE: WGP), respectively; and $247.5 million of borrowings on its revolving credit facility.
WGP funded its WES unit purchase by drawing on a secured revolving credit facility which also closed March 14.
Source: OGFJ

Tuesday, March 15, 2016

MOSCOW -- Rosneft Vietnam B.V., a company of Rosneft Group, has started drilling exploration well PLDD-1X at Block 06.1 located offshore Vietnam.

For the first time Rosneft is operating a drilling project, in International waters confirming the Company's competence and ability to implement technically complex drilling programs offshore.

The design depth of the well will be around 1,380 m, while the sea depth in the area is about 162 m. The expected recoverable reserves of natural gas in the PLDD geological structure are estimated at 12.6 Bcm, and 0.6 mt of gas condensate, which can be developed by subsea completion and tied-back to the existing Lan Tay platform operated by Rosneft in Block 6.1. The drilling will be performed using the HAKURYU-5 drilling rig owned and operated by Japan Drilling Co., Ltd (JDC). Rosneft announced the signing of agreement with JDC at the Eastern Economic Forum-2015.

Following PLDD, the company will drill another exploration well in Block 05.3/11 also in the Nam Con Son basin. Incorporating the two wells into the same program will ensure synergy between the two projects and help reduce the timelines for implementation of the works, thus maximizing the efficiency of exploration projects at the Company’s Vietnamese assets.

Rosneft Vietnam BV also plans to shoot broadband 3D seismic of its existing Block 6.1 operatorship later this year, to enhance ongoing production recovery and explore potential in deeper prospects.

Rosneft Chairman of the Management Board Igor Sechin said, "Rosneft team has already demonstrated their competence in Russia during the successful drilling of the world's northernmost well in the Kara Sea, which resulted in the discovery of a new deposit, the Pobeda field. Today, the Company starts a similar project as a drilling operator in international waters. I am sure that the experience gained in Vietnam will be used by the Company not only in its activity in the southern seas; these competences will find application in planning and implementation of upstream projects in remote areas. I would especially like to emphasize that this project is an example of advanced cooperation with the company's partners in the Asia-Pacific: Petrovietnam and ONGC. We appreciate not only the current progress of joint projects implementation in Vietnam, but also the future prospects for their development."

Monday, March 14, 2016

TEHRAN (Bloomberg) -- Iran may join other oil suppliers in freezing production after restoring its own output to levels before sanctions were imposed, Russian Energy Minister Alexander Novak said after meeting with the Persian Gulf nation’s oil minister.

Iran has “reasonable arguments” not to be constrained by the freeze for now, Novak told reporters Monday at the Russian embassy in Tehran. “Iran may join us in the freeze with time,” he said. “This is a normal, constructive position from our Iranian partners.”

Major oil producers are likely to meet in April to discuss a proposal to cap output at January levels in a bid to stabilize the market, Novak said, adding that he hopes Iran’s Oil Minister Bijan Zanganeh will participate. Qatar’s capital Doha is one option as a location for the talks, Novak said. “It is decided that a joint meeting of OPEC and non-OPEC producers will convene,” Zanganeh said, according to the Iranian Oil Ministry’s Shana news service, without saying if Iran will attend.

Iran is seeking to boost production by 1 MMbpd by June, the country’s Seda Weekly magazine reported, citing an interview with Amir Hossein Zamaninia, Iran’s deputy oil minister for commerce and international affairs. “The positions of Russia about Iran’s return as well as resumption of stability to the oil market were encouraging and very positive,” Zanganeh said, according to Shana.

Price Forecast

Saudi Arabia, Russia, Venezuela and Qatar in February proposed an accord to cap oil output and reduce a worldwide surplus. Crude prices extended gains after their initial meeting on Feb. 16 and have climbed more than 40% since slumping to a 12-year low in January. Prices may have passed their lowest point as shrinking supplies outside the Organization of Petroleum Exporting Countries and disruptions inside the group erode global oversupply, the International Energy Agency said March 11.

Oil will probably end the year at $45 to $50/bbl, Novak told reporters. Brent crude was trading down 2.6% at $39.35/bbl at 3:17 p.m. on Monday in London.

Iran pumped 3 MMbopd in February, data compiled by Bloomberg show. It plans to boost crude output to 4 MMbpd, the highest level since 2008, Zanganeh said, according to the Iranian Students News Agency on Monday.

Saudi Oil Minister Ali al-Naimi said last month in Houston that the process of devising a freeze agreement would continue with more discussions in March. Nigerian Petroleum Minister Emmanuel Kachikwu said two weeks later that talks would convene in Russia on March 20. Russia’s Novak told state television channel Rossiya 24 on March 4 that a meeting could take place between March 20 and April 1 in Russia, Doha or Vienna, where OPEC has its headquarters.

So far no countries have received invitations or an agenda for a meeting, said four OPEC delegates, who asked not to be identified because the matter isn’t public.

From @theeconomist -- A hint of bullishness has returned. The International Energy Agency said on Friday that crude prices “may have bottomed out”. Brent, the world standard, has breached $40 per barrel and West Texas Intermediate, the American benchmark, is close to it. Today OPEC’s report for February may help too, if it shows that Saudi Arabia and Russia honoured their agreement to freeze output at January’s (record) levels, and Iran’s post-sanctions exports are less aggressive than expected. But the bulls’ case is unconvincing. Other producers are in disarray over when and where to meet to discuss further output curbs. Iran’s first shipment to Europe arrived last week and its officials say exports will rise sharply by May. Global demand remains anaemic and stocks are at record highs. Moreover, the urgency to cut production is less than it was at $30. Expect more turbulence.

Shell and its joint venture partners have begun #oilproduction from the third phase of the deepwater #ParquedasConchas (BC-10) development in Brazil's #CamposBasin.
Production for this final phase of the project is expected to add up to 20,000 barrels of oil equivalent per day (boe/d), at peak production, from fields that have already produced more than 100 million barrels since 2009.
Operated by @Shell (50%) and owned together with ONGC (27%) and QPI (23%), Parque das Conchas Phase 3 comprises five producing wells in two Campos Basin fields (Massa and O-South) and two water-injection wells. The subsea wells sit in water depths greater than 5,900 feet (1,800 meters) and connect to a floating production, storage, and offloading (FPSO) vessel, the Espirito Santo, located more than 90 miles (150 kilometers) #offshore #Brazil.

From Art Berman at @Forbes -- The oil-price rally that began in mid-February will almost certainly collapse. It is similar to the false March-June 2015 rally. In both cases, prices increased largely because of sentiment. As in the earlier rally, current storage volumes are too large and demand is too weak to sustain higher prices for long. WTI prices have increased 47% over the past 20 days from $26.2 in mid-February to $38.5 last week. A year ago, WTI rose 41% in 35 days from $43 to almost $61. Like today, analysts then believed that a bottom had been reached. Prices stayed around $60 for 37 days before falling to a new bottom of $38 in late August. Much lower bottoms would be found after that all the way to $26 at the beginning of the present rally. Higher prices were unsustainable a year ago partly because crude oil inventories were more than 100 mmb (million barrels) above the 5-year average. Current inventory levels are 50 mmb higher than during the false rally of 2015 and are they still increasing. International stocks reflect a similar picture. OECD inventories are at 3.1 billion barrels of liquids, 431 mmb more than the 2010-2014 average and 359 mmb above the 2015 level. Approximately one-third of OECD stocks are US (1.35 billion barrels of liquids). For 2015, US liquids consumption shows a negative correlation with crude oil storage volumes. During the 2015 false price rally, consumption began to increase in April and May following the lowest WTI oil prices since March 2009–response lags cause often by several months. Q12015 prices averaged $47.54 compared to an average price of more than $99 from November 2010 through September 2014. This coincided with the onset of declining U.S. crude oil production after April 2015. Net withdrawals from storage continued until consumption fell in July in response to higher oil prices that climbed to $60 in June. Production increased because of higher prices from July through November before resuming its decline after prices fell again, this time, far below previous lows. This sequence of responses shows how sensitive the current market is to small changes.

The International Energy Agency (IEA) says it believes oil prices may have bottomed out, according to Reuters. The energy agency considered declining US production, accelerating production in other countries, and a less-than-dramatic Iranian return to production as factors in its comments on the state of oil prices.
The IEA expects that non-OPEC output could fall by 750,000 barrels per day (b/d) in 2016 compared to its previous estimate of 600,000 b/d. #US #production alone could decline by 530,000 b/d this year, it believes.

Reuters noted that oil prices fell below $30 per barrel in January, in part due to a supply glut stemming from strong US output and OPEC's decision to increase supply to protect market share against higher-cost producers. Prices recently rose to $40 per barrel after #SaudiArabia and #Russia suggested they could freeze output.

In February, #OPEC output decreased by 90,000 b/d, in large measure due to production outages in Nigeria, Iraq, and the United Arab Emirates. The IEA estimates that Iran’s production increased by 220,000 b/d, marking a more gradual return to anticipated production levels than previously expected.

Friday, March 11, 2016

From @TheGuardian -- Crude prices and commodity companies are climbing after the International Energy Agency said oil may have bottomed.

The organisation, which coordinates energy policies of industrialised countries, said output from non-Opec countries was beginning to fall quickly and production from Iran - which has only just returned to the export market following the lifting of sanctions - was not dramatic.

It now believes non-Opec production would fall by 750,000 barrels a day this year compared to earlier forecasts of a 600,000 decline, with US output down by 530,000.

Output from Opec countries fell by 90,000 barrels a day in February due to production problems in Nigeria, Iraq and the United Arab Emirates.

Iran has been less than keen to join a proposed freeze of output at January levels, preferring to increase output now it is back on world markets. Brent crude fell on Thursday after suggestions that a meeting in Russia to discuss curbing the supply glut had been cancelled because of Iran’s position. But the IEA said: "Iran’s return to the market has been less dramatic than the Iranians said it would be: in February we believe that production increased by 220,000 barrels a day and, provisionally, it appears that Iran’s return will be gradual." .

On the overall position it added: "There are clear signs that market forces are working their magic and higher-cost producers are cutting output... For prices there may be light at the end of what has been a long, dark tunnel but we cannot be precisely sure when in 2017 the oil market will achieve the much desired balance. It is clear that the current direction of travel is the correct one, although with a long way to go.". Just a month ago the IEA warned the global oil glut was set to worsen.

The new OPEC Reference Basket (ORB) introduced on 16 June 2005, is currently made up of the following: Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Minas (Indonesia), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela).
Notes:
As of January 2006: The Weekly, Monthly, Quarterly & Yearly averages are based on daily quotations.
As of January 2007: The basket price includes the Angolan crude "Girassol".
As of 19 October 2007: The basket price includes the Ecuadorean crude "Oriente".
As of January 2009: The basket price excludes the Indonesian crude "Minas".
As of January 2009: The Venezuelan crude "BCF-17" was replaced by the crude "Merey".
As of January 2016: The basket price includes the Indonesian crude "Minas".
Source: opec.org

Thursday, March 10, 2016

Saudi Arabian Oil Co. has asked consultants to bid for a role advising it on which assets to privatize and how to execute a potential share sale as the kingdom presses ahead with plans for an initial public offering, people with knowledge of the matter said.

Aramco, as the world’s largest crude exporter is known, sent the request for proposals to international strategy firms about three weeks ago to study scenarios for an initial public offering, including how long the process might take and which assets or joint ventures to include, the people said, asking not to be named as the details aren’t public. Results of the study will be submitted to the government during the first half, according to the people.

Options being considered include selling shares in the parent company, placing Aramco’s domestic and overseas downstream joint ventures into a holding company and selling shares in that, or grouping together the company’s joint ventures and smaller refineries, one of the people said. Request for proposals haven’t been sent to banks yet, the people said.

Deputy Crown Prince Mohammed bin Salman surprised investors and analysts in January by saying that the kingdom was considering an IPO as part of a broader package of economic reforms. The company later confirmed that options included a full initial public offering or the listing of some of its subsidiaries. Bringing in investors would strengthen the company’s focus on long-term growth and the prudent management of its reserves, according to a statement from the company in January.

Saudi Aramco declined to comment.

Aramco currently pumps all of Saudi Arabia’s crude oil, with production at 10.2 MMbpd in February. With relatively opaque operations, the company could fetch a value of anywhere from $1 trillion to $10 trillion, potentially making it the most valuable company in the world, according to Jason Tuvey, an economist and researcher at Capital Economics.

The idea is being considered as OPEC’s biggest oil producer responds to a crash in crude prices and the government cuts spending, delays projects, taps foreign reserves and issues debt as it takes on a budget deficit expected to reach about 17.8% of economic output this year, according to Riyadh-based Jadwa Investment Co.